Memory markets gain steam

Shortages, production reallocations and a changing cast of characters boosts contract pricing for NAND flash, mobile DRAM and another market that might surprise you.

After weathering pricing instabilities and DRAM oversupply in 2012, the memory market is bouncing back. In particular, the mobile device market has buoyed sales, but it has also cause a ripple effect in other sectors, says a new report from TrendForce and the DRAMeXchange.

Brisk demand for SSDs and eMMC memory has prompted manufacturers to shift production capacity from triple-level cell (TLC) NAND flash to multi-level cell (MLC) components. As a result of the tightened supply, contract pricing for TLC flash has risen 1 to 3%, say analysts; meanwhile, MLC pricing has stabilized. They expect the situation to continue through at least midmonth.

As the fabrication at the 20-nm process node becomes better established over the second quarter, increasing yield and reliability, the supply crunch for both SSD and eMMC products should ease. That, combined with softening demand for tablet PCs and smart phones, promises to exert some downward pressure on NAND flash contract pricing.

The real story, though, appears to be in DRAM. A surge of smartphone purchases over the holiday shopping season helped push fourth quarter mobile DRAM revenues to $2.4 billion, up more than 21% from the previous quarter. Apple, for example, sold 40 million units of its iPhone 5. Mobile DRAM sales were particularly kind to manufacturers SK Hynix, which saw Q4 revenues jump by 36.5%, and Samsung, which enjoyed a 26.9% increase. As a result, the two Korean manufacturers between them account for 78.5% of the market. Meanwhile, third-place Elpida Memory Inc. saw an 11.3% increase in revenues, while fourth-place Micron Technology Inc. saw its market share drop by more than 60% in the same period. Elpida fields a quality mobile memory product, which may help boost Micron’s fortunes once the acquisition closes later on this year.

Despite all the talk about DDR4 DRAM, DDR3 memory modules still account for the bulk of sales, and that market remained strong in February, with prices for 1600 Mhz 4-GB modules climbing to $19.75, a jump of 11% over the previous month. DDR3 2-GB modules averaged $11, for a 13% increase. Especially after the long period of DRAM oversupply, an interesting dynamic appears to be fueling this recent price rebound. As memory manufacturers increasingly shift their focus from PC DRAM to mobile and server products, PC OEMs have become concerned enough about their supply chain to bump up their inventory even during the current off-peak season, the report observes. “These manufacturers are currently more tolerant towards the contract prices, given their plans to ensure a stable supply for the peak quarters. With the firm establishment of the pricing uptrend, there is hope that DDR3 4-GB module prices will reach $25 USD during the second half of 2013.”

Meanwhile, the word on the street is that GlobalFoundries’ previously announced purchase of Powerchip Semiconductor’s P3 Fab has fallen through. After acquiring the shell facility in 2006 from Macronix, Powerchip converted it into a 40-nm DRAM facility with a monthly capacity of about 45,000 wafers. The question is whether that was really a fit for GlobalFoundries. “One possible reason GlobalFoundries eventually opted out of the P3 transaction is that most of the plant’s equipment had been intended for PC DRAM production, which is different from the types of product has been known to produce,” the report notes. Whether Powerchip reconsiders selling or finds a suitor interested in running the fab as a DRAM line, the pricing situation is unlikely to change, the DRAMeXchange says. “Even if Powerchip were to re-start production and ease the market shortage situation, the company’s limited capacity is unlikely to affect the original prediction that PC DRAM prices will gradually return to a break-even point.” 2013 should be an interesting year.